Autumn statement 2011

Article

The chancellor has stuck rigidly to his Plan A for deficit reduction. Rather than increase government spending (or cut taxes) to tackle the economy's problems, he has had to find alternative solutions. As a result, he is not tackling directly the most urgent problem facing the economy: a shortage of demand.

This was more like a mini-budget than an autumn statement. The likelihood that the OBR's forecasts - and particularly its downgrading of the growth outlook - would dominate the next day's headlines caused the government to preannounce a series of measures designed to support growth. The aim, no doubt, was to give the impression that the government had a 'plan for growth' as well as a 'plan for deficit reduction'.

However, it is not enough to agree a number of measures - even if some of them are welcome U-turns from the government's previous position - and call them a 'plan for growth'. A real plan for growth should start by identifying what is needed for the economy to grow.

In the short term that means generating additional demand. With our main export market heading into recession and household and business confidence low, only the government is in a position to provide this extra demand. However, this would mean relaxing the pace of deficit reduction; that was a U-turn that the chancellor was not prepared to make on this occasion.

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